TORONTO, Canada — Activist investor Land & Buildings Investment Management has taken a position in Hudson’s Bay Co., urging the parent company of Saks Fifth Avenue to unlock the value of its real estate portfolio and to explore a take-private transaction.

The Stamford, Connecticut-based Land & Buildings, which said it owns 4.3 percent of HBC, called the retailer a “diamond in the rough,” in a letter to the board Monday. It encouraged HBC to focus on monetising its real estate portfolio rather than concentrating its efforts on failed mergers with rivals such as Neiman Marcus Group Inc. or Macy’s Inc.

“The path to maximising the value of Hudson’s Bay lies in its real estate, not its retail brands,” Jonathan Litt, co-founder of Land & Buildings, said in the letter. “In our view, the whole time the company’s management has been struggling to navigate this complicated maze of M&A options, the answer lies in its own real estate portfolio."

The Saks Fifth Avenue location in New York could be valued at C$5 billion ($3.8 billion) alone, Litt said. He estimates the real estate is valued C$35 a share, or four times HBC’s current share price of C$8.88. He argues the company should also evaluate a take-private transaction led by current management, given about 20 percent of the company is held by insiders. He has called for a meeting with the board to discuss the issues.

“Hudson’s Bay is a real estate company, full stop,” Litt writes. “If there is a smarter and better use of any or all of the locations, stores should be closed and redeveloped and put towards their optimal use,” he added. “The next logical step is to aggressively move to monetise and redevelop the company’s real estate, including some of its irreplaceable crown jewel locations."

Shares of the Toronto-based retailer have dropped by a third this year, for a market value of C$1.6 billion.